Man in the hot seat keeps his cool over rising prices

Rough ride: Alistair Darling delivered his first Budget as Chancellor against a backdrop of rising inflation and slowing economic growth

Alistair Darling today predicted inflation will fall back to target next year despite fears it is spiralling out of control.

The Chancellor said he expected inflation to return to 2% in 2009 after rising above target as a result of soaring food and energy costs.

"As is happening in many countries because of commodity prices, inflation in the UK will rise in the short term as higher oil and food prices feed through into domestic inflation," he said. "But inflation is forecast to return to target in 2009 and remain on target thereafter."

The Government's preferred measure of inflation - the Consumer Prices Index (CPI) - is currently running at 2.2% and is set to rise further.

Official figures released next week are expected to show it hit 2.6% in February - meaning it has been above target every month since the Pre-Budget Report in October and for 20 of the last 23 months.

Last month Bank of England Governor Mervyn King predicted the CPI will rise above 3% in the coming months fuelled by rocketing food and energy prices.

The price of oil hovered near record highs today and within a whisker of $110 a barrel at $108.92. It has forced petrol prices higher at the pumps and pushed up gas and electricity bills.

King recently warned the "nice" decade of low inflation and economic expansion was over, leaving the Chancellor in the hot seat for Britain's biggest economic crisis since the early Nineties.

But Darling said: "We will do everything in our power to maintain stability - keeping inflation and interest rates low and maintaining our record of growth.

"The British economy has now been growing continuously for over a decade - the longest period of sustained growth in our history."